A §1031 Tax Deferred Exchange may be used to accomplish many real estate investment goals of an investor. The most obvious benefit is the deferral of both Federal and State capital gain taxes and the recapture of depreciation. This allows the investor to invest ‘ALL’ of the net proceeds from the relinquished property into an equal or greater value replacement property. If the investor purchases a replacement property of lesser value, then they would work with their CPA or tax professional to determine their tax liability. Here are a few reasons why you may want to consider a §1031 Tax Deferred Exchange.
1. Exchange into a more valuable property which can increase the cash flow and may provide more depreciation, thus resulting in a higher return on your investment.
2. Diversify your real estate investments by exchanging into another city or state or property type, such as a condo in New York for a retail center in San Diego.
3. Consolidate your real estate investments by exchanging several properties into one property, such as three single family rentals into one office building.
4. Lessen your management responsibilities. This can be accomplished by exchanging your self-managed triplex for a managed retail center.
5. Estate planning purposes to diversify your real estate investments and designate the heirs to each of your properties. This will let each heir decide what they want to do with their property.
Whether exchanging for a more valuable property, for a different property type or location, for better management or for estate planning purposes, the benefits of a §1031 Tax Deferred Exchange are significant.
Exchange Resources, Inc. cannot and does not provide advice regarding specific tax consequences. Investors considering a §1031 tax-deferred exchange should seek the counsel of their accountant and attorney.
To find out more information about 1031 Tax Deferred Exchanges, please contact Jeff Yonamine, Exchange Resources, Inc. 916-612-1031